As Covid-19 continues to spread across the United States, Tilman Fertitta, the Houston Rockets’ owner and CEO of Landry’s, Inc., a corporation that owns more than 600 restaurants, hotels, casinos and entertainment venues, has temporarily laid off 40,000 of his employees, he told Bloomberg. The layoffs are mostly coming from restaurants chains and hotels.
“I want to hire every employee back,” Fertitta, who Forbes estimates has a net worth of $4.6 billion, told Bloomberg. “This is very hard on a lot of working families but we have to survive or there is no company.”
Fertitta, Forbes’ 140th wealthiest person in America in 2019, has stumbled every step of the Covid-19 pandemic, and only public ridicule has corrected his mistakes. Now, he told Bloomberg, he wants authorities to allow businesses to re-open in a limited capacity in a matter of weeks to slow his economic burden.
Here’s how Fertitta has managed his businesses since the pandemic began significantly affecting America.
Fertitta downplayed the seriousness of Covid-19
As late as March 6, Fertitta said in a CNBC interview, “Everyone needs to remember. This is not gonna kill you unless you’re most likely already a sickly person ... More people we’re gonna find out every day have this, but we’ve got to go on about our lives. You are not going to die from this.”
As of Thursday afternoon, the United States has more than 78,000 cases of Covid-19, and more than 1,100 people have died, including a teenager in California. On March 11, the NBA suspended its season, and every other major American sport followed soon thereafter. Now, non-essential businesses have shutdown worldwide to slow the spread of the virus.
During his CNBC interview, Fertitta went on to explain the financial implications of Covid-19, saying he was down $1 million in revenue from a base of $12 million in restaurant sales. “But remember, that last million in sales is your most profitable,” Fertitta said. “That’s where your heavy profit is, so if you don’t cut expenses, then what can you cut? We’re not going to cut the quality of the product. So you can only cut labor.”
Fertitta tried to take away employee benefits
On March 17, as a result of restaurants shutting down and transitioning to takeout only, employees of Fertitta’s Post Oak Hotel in Houston were notified their benefits would be cut, per The Houston Chronicle. Vacation time and paid time off were suspended, and employees were told how to apply for unemployment.
But public backlash forced Fertitta to reverse this decision less than 24 hours later, when the Post Oak said it would maintain benefits for employees enrolled in its health plan until normal hours resume, or June 30, 2020.
Fertitta furloughed 40,000 employees, and advocated for business re-openings
On March 25, the billionaire said he temporarily laid off 40,000 employees, and Bloomberg reports that, in total, his companies have laid off 70 percent of their staff. His restaurants are bringing in just four to five percent of their usual business.
He also advocated for the partial re-opening of restaurants to soften the economic blow.
“I think what we are doing with the shutdown is good but in a few weeks people will need to be around people,” Fertitta told Bloomberg. “Otherwise you are going to go into an economic crisis that is going to take us years to dig ourselves out of.” He wants to re-open restaurants at 30 to 40 percent capacity.
Experts are having trouble determining when the peak of the virus could reach the U.S., but it could be months.
Everything Fertitta has done with the Rockets has shown he cares foremost about profit
Fertitta bought the Rockets for a record $2.2 billion in 2017, and fans have already turned on him. He cut corners building his team’s roster to avoid paying a luxury tax. In the 2018 offseason, months after Houston nearly knocked out Golden State in the playoffs, he let Trevor Ariza walk for what would’ve likely amounted to $39 million. He also let Luc Mbah a Moute walk on a reasonable contract offer from the Clippers.
Notably, he also denounced Rockets general manager Daryl Morey’s tweet in support of pro-democracy protestors in Hong Kong. The move was seen as an attempt to repair tension between the NBA and its top international market, China.
In response to Morey’s tweet — which read, “Fight for freedom, stand with Hong Kong” — Fertitta responded that Morey doesn’t speak for the Rockets. “Our presence in Tokyo is all about the promotion of the NBA internationally and we are NOT a political organization.” He even considered firing Morey, known for being one of basketball’s best GMs.
China ultimately suspended cooperation with the Rockets, causing the franchise and the NBA to lose what commissioner Adam Silver believed to be hundreds of millions of dollars. A projection of the 2020-21 salary cap from January estimated that the cap would drop just $1 million per team under what was expected before the China incident, suggesting that its impact was less than originally thought.
On March 13, ESPN’s Ramona Shelburne reported on conversations within the NBA about how to suspend the season prior to Rudy Gobert’s positive test for Covid-19. Per Shelburne, Warriors owner Joe Lacob pushed for a postponement, and Thunder owner Clay Bennett noted that players and employees around the league likely already had Covid-19. Fertitta, however, “suggested a three- to four-week pause while expressing frustration over the financial hit he’d already taken with empty restaurants and early-season issues in China.”
Why is this all important?
The worst is yet to come in the U.S., where Covid-19 infection cases haven’t reached their apex. As economic instability rises, corners will be cut by those with power that disproportionately affect those without.
In the Bloomberg story, Fertitta admitted that he plans to buy back some of his business debt with his newfound cash flow when the market begins to rebound. Doing so won’t help the regular people he employs whose jobs have been cut.
Still, he’s confident his businesses have access to enough cash to ride out the current volatility and he’s even considering buying back some of Golden Nugget’s debt when things begin to rebound.
”As soon as I see us making the turn and everything is going to reopen we are 100 percent going to buy back our debt,” he said. “I see that as a great opportunity.”
While the wealthy are always going to have an upper hand on everyday people during times of crisis, there is power in public pressure.
On March 24, the Sixers attempted to cut the salaries of at-will employees making more than $50,000. Then Joel Embiid, one of the Sixers’ highest-paid employees, donated $500,00 to Covid-19 medical relief and vowed to aid those at-will employees. Public backlash following Embiid’s generous offer forced Josh Harris — the team’s owner, whose net worth is $3.7 billion — to reverse his decision.
Per ESPN’s Adrian Wojnarowksi, “other owners are watching Sixers and weighing the PR fallout ... no owner wants to log into Twitter and see his net worth trending after announcing this kind of news.”
The Rockets have, so far, vowed to “take care of” Toyota Center arena employees. Hopefully Fertitta can learn to take care of his low wage workers outside the Rockets organization, too.